Mortgage relief: Houses turned into billboards

Struggling homeowners could get their mortgage paid, for up to a year

Sarah Hostetler (C) and her parents Beth and Scott pose in front of their home in Buena Park, Calif., Feb. 11, 2012.

BUENA PARK, California — When they saw the house on El Dorado Drive in this Los Angeles suburb being painted a startling orange and green and giant billboards hung on the outside, Scott and Beth Hostetler’s neighbors were initially angry and confused. Some even considered calling the police.

But what they witnessed on Friday was not an offensive redecoration decision by the Hostetlers, but rather the debut of one of the more unusual schemes to arise from the housing crisis. In return for allowing the front of their four-bedroom house to become a garish advertisement, the Hostetlers are getting their nearly $2,000 monthly mortgage paid by the marketing company behind the project, Brainiacs From Mars.

In a residential neighborhood without heavy traffic, cars passing by the house slowed and drivers gawked at the vivid colors and a giant Brainiacs From Mars billboard.

Romeo Mendoza, the company’s founder and CEO, told Reuters that his ultimate goal is to turn 1,000 homes across the United States into giant advertisements for his marketing firm.

And in each case struggling homeowners will get their mortgage paid, for up to a year.

“If we roll it out to scale and impact the foreclosure crisis, that would be amazing,” Mendoza, 42, said.

Mendoza said he chose the Hostetlers because they are nice people and he wants to choose the most deserving cases rather than homes on the busiest streets.

Since he advertised the scheme on his website in April 2011, Mendoza says he has had 38,000 applications, from as far afield as Russia and Japan.

The Hostetlers, who are both deaf, were one of those applications and were informed three months ago that their home had been chosen to launch the scheme.

There are a number of issues that could prevent the idea from gaining traction, namely zoning laws and other city codes that limit where advertising can be placed and sometimes regulate other aspects of a home’s appearance.

But Mendoza says the idea could help struggling homeowners who face being evicted from their homes through foreclosure, although the Hostetlers say they are going to use the money to pay down credit card debt.

Most of the 38,000 applicants have come from California, Nevada and Florida – the three U.S. states hardest hit by the foreclosure crisis triggered by the collapse in housing prices after the 2008 financial crash.

Graffiti or godsend?In southern California 44 per cent of homeowners are “underwater,” owing more on their mortgages than their homes are worth. In Buena Park, about one in every 270 homes has been foreclosed upon.

“The response has been overwhelming,” Mendoza says. “People are hurting, and struggling to stay in their homes. If we can help some of them, that would be great.”

Mendoza’s plan is to advertise his company’s name and its social media marketing tools on the front of people’s homes. In return, he hopes the quirkiness of the scheme will convince companies to hire Brainiacs From Mars to run their advertising campaigns.

He says he is already negotiating deals with some big firms. The payments to homeowners for the initial experiments are being funded by profits from some of his company’s other projects.

The reaction of the Buena Park city council, and some of the Hostetlers’ neighbors, suggests that Mendoza could face a bumpy ride.

The Hostetlers’ neighbors have been told that the house will only be a giant advertisement for a month. In fact Mr. Hostetler says he would like it to stay that way for six months.

Neighbor Vivian Largent said: “If it’s for a month, I’m ok with it. But no longer.”

Echoing that sentiment, another neighbor, 80-year-old Bob Pancoast, said: “All the neighbors were a little upset at first. We thought they had gone off their rocker. But I guess it’s a good idea for them.”

Mendoza said he had checked and that there are no restrictions in Buena Park on the colors homeowners can paint their houses. “They can paint them multi-colors if they like,” Mendoza said.

Fred Smith, who sits on the Buena Park city council, was surprised when told about the scheme – and not at all happy.

The color scheme was fine, he said. But the advertisements were another matter.

“This does not follow with the city codes,” he said. “They are going to be in trouble. They need to go someplace else.”

Charles Mclaughlin, a finance expert in the housing industry, said: “I don’t think the program will be a success. It will be akin to graffiti – that’s how people are going to look at it. They are going to run into zoning problems everywhere.”

Mendoza said: “There are definitely zoning issues in some cities, and we realize that.

“But we have really hit a nerve, and we can’t let that stop us. Once people start seeing how it works, once they get it, the moment they realize it is paying people’s mortgages, they are always on our side, because of this economy.”

Banks pay delinquent borrowers $35,000 to sell their homes

The bank offered Angelique Pierce $25,000 to short sell her home. The listing price: $95,000.

NEW YORK (CNNMoney) — In an effort to cut their losses, banks are paying some struggling homeowners as much as $35,000 to sell their homes before they end up in foreclosure.

The deals are aimed at incentivizing homeowners who owe more on their home than it is worth and who are seriously delinquent on their payments to sell their homes in a short sale.

In short sales, homes are sold for less than what is owed and the bank forgives the excess debt. Banks have been reluctant to approve such deals in the past — since they take a loss on the home — but in certain cases, it’s become a much better proposition than letting the homeowner fall into foreclosure.

This new approach by the banks has startled plenty of homeowners, according to Elizabeth Weintraub, a Sacramento-area real estate agent who specializes in short sales.

“Initially, the homeowners are skeptical,” she said. “The bank may have already turned down their request for a modification. Then, one day, they call and say, ‘Let us give you some cash.'”

When Chase Mortgage (JPM, Fortune 500) told Angelique Pierce, that she would receive a check for $25,000 if she sold her house, she couldn’t believe it.

“I got the offer in the mail,” said the Rancho Cordova, Calif. resident. “I called my bank to ask if it was real.”

After Pierce became disabled a few years ago and had to stop working work, she fell behind on payments on both her first and second mortgages, valued at $250,000 and $50,000, respectively.

Now, she’s trying to sell her three-bedroom ranch for just $95,000 — almost half of the $179,000 she paid for the place in late 2002.

Foreclosure free ride: 3 years, no payments

From the bank’s point of view, the offers make sense, according to Tom Kelly, a spokesman for Chase Mortgage, who would not comment on Pierce or other individual cases. “The first choice is a modification but if that’s impossible than a short sale is a faster, more efficient solution,” he said.

For the banks, foreclosure has become an increasingly difficult and expensive option. Homeowners have learned to fight the banks tooth and nail, dragging out cases for years.

And as the cases drag, expenses grow. Homeowners not only stop paying their mortgages but they stop paying property taxes and conducting normal maintenance as well. Roofs, siding, plumbing and other parts of the home deteriorate and the property loses value. By the time banks take possession, they’re out tens of thousands of dollars.

Foreclosures: America’s hardest hit neighborhoods

“I’ve seen a lot of foreclosures for sale where it would cost a lot more than $20,000 to get them into condition to sell again,” said John Hayton, a short sale specialist in Orlando, Fla, who has had a number of clients receive offers from the banks.

Short sales also command higher prices than foreclosed homes. In December, foreclosed properties sold for an average of 22% less than conventional sales, while the discount for short sales was only 14%, according to the National Association of Realtors.

All that has been true for years, but it is only lately that these outsized incentives, which Bloomberg recently reported on, have surfaced.

Sellers are more cooperative when they’re going to receive a five-figure check for their troubles.

Nick Chaconas, an agent with discount broker Redfin, wondered why one seller was so anxious to sell their home. “Since I represent the buyer, I didn’t even know about the incentive until the closing,” he said.

It turned out that the seller’s bank was writing her a check for $30,000.

Whether sellers can expect incentives fromtheir banks depends on multiple factors, including where they live.

Wells Fargo (WFC, Fortune 500) limits its offers to certain states, such as Florida, where the foreclosure process can be lengthy, according to spokeswoman Veronica Clemons. The bank haspaid $10,000 to $20,000 to borrowers who short sell or transfer their title to Wells via a deed-in-lieu.

What the foreclosure settlement means for you

Bank of America (BAC, Fortune 500) had a pilot program in Florida that paid incentives of $5,000 to $20,000 for sales that were initiated between Sept. 26, 2011 and Nov. 30, 2011 and close by the end of this August. The amount of the incentive is based on 5% of the unpaid balance, with a $5,000 minimum and $20,000 maximum.

Jumana Bauwens, Bank of America’s spokeswoman, called it a “test-and-run program” that may beexpanded to other states.

The offers are not always a panacea for homeowners struggling to pay the bills, however.

Pierce, for example, has not been able to make hers pay off. She had a buyer but her second mortgage holder refused to go along with the deal unless it got a share of the $25,000 she was being offered by the bank. She said that the bank balked at the deal and the sale was cancelled.

She’s looking for another buyer, but it’s up in the air if Chase will honor its original offer if the second mortgage holder won’t cooperate.

The case for buying a home now

According to housing bear Christopher Thornberg, the “wild up-and-down” in real estate is over, and markets should begin a gradual turnaround soon. (Comstock Images)

A notorious housing market bear has changed his tune. Yes, he says, now is a good time to buy a home, if …

It’s a pretty important “if.” Still, people noticed when Christopher Thornberg — an economist who built a reputation for being a relatively lonely and boisterously outspoken housing doomsayer in the middle of the last decade, while Americans were buying homes as fast as they could — recently began to suggest that the overall market had settled and conditions are much improved for buying.

Thornberg, a founding principal of Beacon Economics, an independent research firm in Los Angeles, and former senior economist with the UCLA Anderson Forecast, talked about the differences between then and now:

Q: Is it safe to presume that you made no friends in the housing industry when you started publicly warning that the bubble was bursting?

A: Yes, I’m persona non grata. Local (housing-industry) groups will interact with me, but the national groups, no way. In 2004 and 2005, I was screaming that there was a real estate bubble, and everyplace I went, other economists would pooh-pooh me.

When the National Association of Realtors was spending lots of money in 2007 advertising to consumers that it was both a good time to buy and sell a house, I continually pointed out the stupidity of thinking — and promoting — the idea that housing is a great investment. It’s not. We as a nation need to come to the functional realization that housing is a consumption good — the lower the price of housing, the better off we are as a nation. Cheap housing is good.

Q: Why weren’t more economists vocal at that time that the market was getting overheated?

A: Ninety percent of all economists are guys who sit in academic offices writing on obscure issues that are unimportant, that three other people will read, so that they’ll get tenure. The majority of economists aren’t attached to the real world.

But most private-sector economists are attached to the financial industry, they work for housing agencies and the industry. They have a conflict of interest.

I’d like to say I was the smartest guy out there, but there were other economists shouting “Bubble!” — though they were in the minority. But the guys who look at the economy on an independent basis, for the most part, they got it.

Economists are taught that markets are efficient, and from that perspective, bubbles can’t happen. When you’re sitting there in the midst of the real estate market going up, up, up, it’s easy to say, if this is a bubble, it would have blown up already. A guy walked up to me in 2006, when prices were still climbing, and said, you ruined my life — because I listened to you, I didn’t invest in property, and look at all the money I could have made.

Q: Did you hear from him again, when housing prices kept falling for years after that?

A: No.

Q: Do you believe the market has bottomed, from a nationwide perspective?

A: Absolutely. That’s been going on for a while now. You can argue, is this (bottoming) just in certain markets? But when all is said and done, the wild up-and-down is done.

But housing markets don’t bounce, they splat. They hit bottom and they stay on the bottom. We have to get rid of excess supply of units and get rid of foreclosures, and home equity has to start building. That’s when the market starts to recover.

So, we’re still in the splat phase. This should be the year that things start to perk up a little. We’ve burned up excess supply, foreclosures are starting to decline, income is starting to rise, jobs are starting to rise. Housing should start to turn the corner this year — but there won’t be anything frenetic, and there will only be a slow increase in prices.

Q: Do you think conditions now are right for buying?

A: A couple of years ago, I was saying that we were still in the bubble, don’t buy. But now I’ve been saying, if you need a house — if you recognize that a house is a consumption good and not an investment opportunity, you should consider buying. With interest rates continuing to come down and with prices that have sagged, in some markets — particularly Florida, Arizona and Nevada — affordability is at record levels. But it has to be a long-term hold — you have to be in long term.

Q: Where do you see interest rates going?

A: Treasurys will start to goose up this year, as fears of Europe start to fade away, and that will start to push mortgage rates up, but I don’t see them going to 8 percent or anything.

BART police officials Tuesday unveiled a new zone geographical structure that they believe will spark proactive problem-solving to reduce crime and social disorder.

Speaking at a news conference at police headquarters at the Lake Merritt BART station, Police Chief Kenton Rainey said creating the new
structure is one of the recommendations that the National Organization of Black Law Enforcement Executives made following the fatal shooting of unarmed passenger Oscar Grant III at the hands of BART Officer Johannes Mehserle three years ago.

“We’re very excited about the direction we’re going in and believe it will result in more accountability for our officers,” Rainey said.

Grant was fatally shot on the platform of the Fruitvale Station in Oakland on Jan. 1, 2009, by Mehserle, who claimed that he had meant to use a
Taser on Grant instead of his service gun. Mehserle was later convicted of
involuntary manslaughter for the shooting.

Deputy Police Chief Benson Fairow said the new structure breaks the current zones down into smaller areas that are easier to manage.

Fairow said the department used to have four patrol zones but it will now have five zones.

He said each zone will have a lieutenant supervising a team of patrol sergeants, police officers and community service officers who will be responsible and accountable for providing service to their areas at all times.

Fairow said BART police will use an enhanced form of community policing they call Community Oriented Policing Problem Solving, or COPPS.

He said it is a policing philosophy and management approach that promotes community, government, police partnerships and proactive
problem-solving.

The idea, Fairow said, is to create positive, productive relationships between the transit agency’s police officers and its riders in order to make riders feel safer and promote greater job satisfaction for officers.

Rainey said he thinks “passengers will feel safer” because more police officers will be in BART’s trains and stations.

Farrow said the new zones are: Zone I, which includes all Oakland Stations, Zone II, which includes all stations in Contra Costa County and
Berkeley, Zone III, which consists of all other stations in Alameda County, which includes the area from San Leandro to Dublin/Pleasanton, Zone IV, which consists of all San Francisco stations, and Zone V, which includes the stations in San Mateo County.

Looking at bad and worse figures from the state, Pleasanton school officials have released numbers that could mean cuts of nearly 30 full-time jobs for the next school year budget that takes effect July 1.

The more severe cuts would come if Gov. Jerry Brown’s plan for a tax increase on the November ballot fails. In that scenario, nearly $5.5 million would have to be cut from the 2012-13 school year budget, and school officials are gearing up now to make those cuts.

“Due to statutory timelines for layoffs, we are unable to wait until November and hope that the governor’s tax initiative passes,” Superintendent Parvin Ahmadi states in a Guest Opinion this week (page 8) in the Pleasanton Weekly. “We must base our budget on facts and not hope.”

A tentative plan from the district would eliminate funding for the Barton Reading Program, axe adult education and summer school, along with its director and classified staff, drop three full-time counselor positions from middle schools, another three at high schools and one-and-a-half at elementary schools, plus eight-and-a-half elementary fulltime reading specialist positions.

The full-time positions cited are not necessarily full-time jobs held by one person; in many cases, employees are part-time workers or split their schedules at different locations.

The plan would also cut one full-time psychologist position and one program specialist position and eliminate support for home schooling for kindergarten through eighth grade. Two full-time custodian positions at high schools and a one-and-a-half time middle school custodian position would be cut, along with a half-time custodian position at district offices. A full-time equivalent maintenance position would also be cut, as would car allowances for managers; management would see its work year cut by five days.

Should voters approve a tax increase, many of those worst-case cuts could be restored sometime after November. The director of adult education and summer school could be brought back, as could classified support for those programs. Elementary school counseling could be restored midyear, bringing it to the same as this year; even with the tax increase, middle school counseling would see one-and-a-half fulltime positions cut and high school counseling would be cut by one fulltime position.

If the tax increase is approved, elementary reading support specialists would be still cut by four-and-a-half fulltime positions and the teachers assigned to the Barton Reading Program would be cut by half to one half-time position. Psychologists and program specialist positions would remain the same, as would the one-and-a-half-time position for home schooling support. Custodial positions could be restored to their 2011-12 schedules.

What the foreclosure settlement means for you

Homeowners who lost their homes to foreclosure could be eligible for a small award of up to $2,000 as part of the settlement deal.

NEW YORK (CNNMoney) — The nation’s five largest banks have finally struck a deal with 49states to settle charges of abusive and negligent foreclosure practices dating back to 2008.

Under a deal announced Thursday, the banks will commit $26 billion to helpunderwaterhomeowners and compensate those who lost their homes due to improper foreclosure practices.

The banks also agreed to change the way they handle and approve foreclosures.

A group of state attorneys general claimed that banks lost important paperwork, cut corners and enlisted robo-signers to attest to facts they had no knowledge of on hundreds of documents a day.

The settlement has been in the works for more than a year.

What did the mortgage lenders and loan servicers agree to do? The banks and servicers have committed at least $17 billion to reduce principal for borrowers who 1) owe far more than their homes are worth 2) are behind on payments.

The amount of principal reduction will average about $20,000 per borrower.

Another $3 billion will go toward refinancing mortgages for borrowers who are current on their payments. This will enable them to take advantage of the historic low interest rates currently available.

The banks will pay $5 billion to the states and the federal government, the only hard money involved in the deal. Out of that fund will come payments of $1,500 to $2,000 to homeowners who lost their homes to foreclosure.Other funds will be paid to legal aid and homeowner advocacy organizations to help individuals facing foreclosure or experiencing servicer abuses.

Another $1 billion will be paid directly by Bank of America to the Federal Housing Administration to settle charges that its subsidiary, Countrywide Financial, defrauded the housing agency.

In addition, the banks agreed to eliminaterobo-signing altogether and to use proper and legal procedures when putting homeowners through the foreclosure process. They also agreed to end servicer abuses, like harassing delinquent borrowers for payments, and to include principal reductions more often in their mortgage modifications programs. (Mortgage deal could bring billions in relief)

The Federal Housing Finance Agency, which oversees the two government-sponsored mortgage giants, will not allow any balance reductions for loans insured by the companies under the settlement.

I lost my home to foreclosure; how do I know if I qualify for payment? If you were foreclosed on in the calendar years 2008 through 2011, you may be be eligible for a payment of up to $2,000. People who think they may qualify should notify their bank.

The exact amount of the payments will depend on how many people participate in this part of the settlement. They will share equally in a pool of $1.5 billion. The U.S. Department of Housing and Urban Development expects about 750,000 former homeowners to take part.

What should I do if I think I may qualify for a principal reduction or refinanced mortgage? Contact your lender/servicer and ask them to review your case.

If I take the money, what rights do I give up? Individual borrowers do not give up any right to sue.

As part of this deal, state attorneys general gave up the right to sue the mortgage servicers for foreclosure abuses arising out of the robo-signing scandal. However, they reserve the right to sue if they uncover improper acts when the loans were originated or when they were securitized.

0:00 / 2:11 Criminal prosecution still an option

When will the new rules and bank policies be put into place? Most of them have already become part of bank policies.

When will homeowners get paid? HUD said the settlement will be put before a court for approval within two weeks. It is unknown how long it will then take for a court to rule.

The relief for homeowners has to be completed within three years, but the state attorneys general and HUD want it to be front-loaded and completed within 12 months.

Would I have to pay taxes on the principal reductions or the pay-outs? If the principal is reduced in 2012,it will not be subject to income tax.

That’s because the Mortgage Debt Relief Act of 2007 allows taxpayers to exclude income from the discharge of debt on their principal residence. The act is scheduled to expire at the end of this year, however.

So if the act is not extended and the principal reduction occurs in 2013, borrowers may be on the hook to pay taxes on the settlement amount.

It’s not clear whether you would have to pay taxes on the $1,500 to $2,000 payout. The IRS declined to comment on the question.

Which state didn’t participate and what does it mean if you live in that state? Oklahoma was the only holdout of the 50 states. Instead, it announced its own settlement with the five banks Thursday.

Under its settlement, the banks agreed to pay $18.6 million in damages, part of which would compensate homeowners who were victims of unlawful and unfair mortgage practices, according to the Oklahoma attorney general’s office.

Homeowners who believe they may have been wrongly foreclosed upon should visit the Oklahoma attorney general’s website and fill out the paperwork for processing a claim.

Will the settlement make it harder to get a mortgage? The new rules and regulations the banks have agreed to under the settlement should have little impact on future mortgage borrowing since most of practices are already in place, said Keith Gumbinger of HSH Associates, a mortgage information provider.

Only $5 billion of the $26 billion settlement will be a direct cost to the banks. The remainder will be the cost of modifying mortgages. Many of those modifications may be in the best interests of the banks to make, however, since the alternative may be foreclosure, which can cost banks more than modifications.

WASHINGTON (CNNMoney) — In the largest deal to date aimed at addressing the housing meltdown, federal and state officials on Thursday announced a $26 billion foreclosure settlement with five of the largest home lenders.

The deal settles potential state charges about allegations of improper foreclosures based on robosigning, seizures made without proper paperwork.

The settlement includes the Justice Department and the U.S. Department of Housing and Urban Development, as well as 49 state attorneys general — all but Oklahoma.

“We are using this opportunity to fix a broken system,” said U.S. Attorney General Eric Holder at the news conference announcing the settlement.

The settlement sets up a federal monitor to oversee the process and try to prevent roadblocks and red tape that tripped many homeowners seeking help in earlier programs designed to address the housing crisis.

President Obama said the settlement will “begin to turn the page on an era of wrecklessness that has left so much damage in its wake.”

“No action, no matter how meaningful, is going to by itself entirely heal the housing market,” he said in separate remarks. “But this settlement is a start.”

Most of the relief will go to those who owe far more than their homes are worth, known as being underwater on the loans. That relief will come over the course of the next three years, with the banks having incentives to provide most of the relief in the next 12 months.

“This settlement is about homeowners, homeowners in distress,” said Iowa Attorney General Tom Miller at the news conference with state and federal officials.

What the settlement means to you

Principal reduction: At least $17 billion will go to reducing the principal owed by homeowners who are both underwater and behind on their mortgages.

The agreement calls for principal reduction for as many as 1 million people. But it’s unlikely the money will go that far, because many people need more than the $17,000 average reduction that would result if the money is split among 1 million homeowners.

At the same time, total principal reduction could go higher — to as much as $34 billion — since the agreement requires deeper principal reductions for the most troubled loans.

Refinancing: Officials say up to 750,000 other underwater homeowners who are current on their mortgages will be able to refinance their current loans at lower rates. They will not receive a reduction in principal, but with mortgage rates now near record lows, they could receive substantial savings on their monthly payments.

The settlement sets aside $3 billion to account for the reduced interest payments the banks will receive after the refinancing.

Robosigning payments: About $1.5 billion of the settlement will go to homeowners who had their homes foreclosed upon between Jan. 1, 2008 and Dec. 31, 2011, and who meet other criteria. They will receive up to $2,000 each.

Accepting that payment does not preclude homeowners who lost their home in an improper foreclosure from suing the bank to recover damages, Donovan said.

Participating banks: The five mortgage servicers that are parties to the settlement — Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Wells Fargo (WFC, Fortune 500) and Ally Financial — will pay a total of $5 billion to the states and federal government. Some of that money will go to foreclosed homeowners and the rest to the states.

Federal officials say negotiations are underway to expand the settlement to nine other major servicers, which would raise the overall value of the settlement to $30 billion.

Related settlements: The deal spurred pacts between the authorities and banks in similar cases.

Oklahoma Attorney General Scott Pruitt announced a separate $18.6 million settlement that addressed homeowners whose homes were foreclosed through improper means, but did not provide help to those whose mortgages were underwater. He said he believes the broader agreement “overreached” the authority of both federal and state governments.

“We had concerns that what started as an effort to correct specific practices harmful to consumers, morphed into an attempt by President Obama to … fundamentally restructure the mortgage industry in the United States,” Pruitt said.

The Federal Reserve said it had reached an agreement with the five banks to pay $766.5 million in sanctions related to their servicing practices.

And Loretta Lynch, the U.S. Attorney in Brooklyn, N.Y., announced a $1 billion settlement with Bank of America to resolve claims of underwriting and mortgage origination fraud by BofA and mortgage lender Countrywide Financial, which BofA bought in 2008.

The bigger foreclosure problem: The $26 billion deal announced Thursday is the second biggest settlement ever involving states. It trails only the $206 billion pact in 1998 with the tobacco industry.

And it dwarfs any settlements that major Wall Street firms have reached to resolve other allegations of misdeeds related to the financial markets meltdown and the Great Recession.

Still it only will help a faction of those homeowners who are struggling with mortgages. The relief would not be available to those homeowners whose mortgages have been sold to the government-sponsored mortgage guarantors Fannie Mae and Freddie Mac.

There are 1.5 million homeowners who are 90 days or more delinquent on their mortgages but not yet in foreclosure, according to the most recent estimate from the Mortgage Bankers Association. An additional 1.9 million are in the foreclosure process. And CoreLogic estimates that 11 million homeowners are underwater on their mortgages.

The settlement does not preclude criminal prosecutions from being pursued. It also doesn’t stop investigations into other allegations of misdoings, such as the process of bundling loans into mortgage-backed securities and selling them to investors.

“It wasn’t the servicing practices that created the bubble nor caused the collapse,” said Donovan. “It was the origination and the securitization of these horrendous products. We will be aggressive about going after those claims.”

The deal is supposed to protect consumers when it comes to robosigning, and ensure that mortgage servicers agree to communicate better, avoid delays and give homeowners who are late on mortgage payments a fairer shake.

New York’s participation had been shaky this week, because some of the banks involved in the multi-state deal had also been sued by Attorney General Eric Schneiderman last week. Those banks — Bank of America, Wells Fargo and JPMorgan Chase — had also asked for a legal pass from Schneiderman’s lawsuit, which accuses them of deceptive foreclosure practices for relying on the Mortgage Electronic Registration System.

On Tuesday, Schneiderman’s office organized a media briefing to talk about the deal and then canceled it minutes before it was supposed to begin.

0:00 / 3:54 One man’s fight against foreclosures

The big question throughout the negotiations was how much money would be available to help homeowners, which depended on how many states agreed to the deal. California’s participation raises the total settlement value by several billion dollars.

At least one consumer advocacy group, the Center for Responsible Lending, has said the deal — while “no silver bullet” — leaves room to hold banks accountable in other mortgage probes, said Kathleen Day, a spokeswoman for the nonprofit.

But other left-leaning groups, including Move On and the New Bottom Line, are continuing to urge states to hold out for a big criminal investigation and a $300 billion settlement award.